HAMP Denials and Complaints Continue to Mount
Last Updated on June 26, 2017
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At A Glance
- This Alert Affects
- Consumers who attempted to receive a modification of their mortgages through the Home Affordable Modification Program (HAMP).
- Damages
- Reports have surfaced that certain banks may be stringing along borrowers with the promise of permanent loan modifications that they never intended to grant and have profited from struggling borrowers in doing so.
- Company(ies)
- Mortgage lenders, including Ocwen, GMAC, Ally Financial and Select Portfolio Servicing Inc. (SPS)
- Additional Details
- HAMP lowers borrowers' monthly payments to 31 percent of their gross monthly cross income to make their payments more affordable.
- Date
- Mortgage lenders, including Ocwen, GMAC, Ally Financial and Select Portfolio Servicing Inc. (SPS)
Consumers who experienced problems obtaining permanent loan modifications through the Home Affordable Modification Program (HAMP) may have legal recourse. It has been alleged that some lenders participating in HAMP are engaging in a number of unfair, deceptive and misleading practices to wrongfully deny consumers permanent modifications of their mortgages. These lenders are allegedly leading borrowers to believe their loans could be permanently modified upon the successful completion of a temporary trial period, but in actuality, have no intention of living up to their end of the bargain. To make matters worse, reports are surfacing that these banks are profiting from delaying and denying loan modifications.
HAMP Applicants: Have You Experienced These Problems?
Consumers have reported that lenders have engaged in a number of misleading practices including, but not limited to, the following:
- Failing to grant borrowers HAMP loan modifications after the successful completion of trial period plans
- Repeatedly requesting the same documents and financial information
- “Losing” documents
- Purposely imposing “obstacles” in the evaluation process to delay or prevent permanent loan modifications
- Misrepresenting the status of loan modification applicants
- Failing to keep accurate records on borrowers’ accounts, which include information on fees, payments, credits, debts, etc.
- Failing to evaluate borrowers’ eligibility for permanent loan modifications in a proper and timely manner
- Failing to provide account information as requested by borrowers
- Charging excessive, unlawful and unreasonable fees without properly explaining to borrowers the reasons behind these charges
- Increasing borrowers’ debt obligations
- Telling borrowers to stop making mortgage payments under the false pretense that this will not damage their credit scores and is necessary to qualify for a loan modification
- Failing to apply payments properly
- Breaching trial period plan contracts
- Unlawfully proceeding with foreclosure despite borrowers’ compliance with the contractual obligations of their trial period plans
Banks Profiting from Delayed Loan Modifications
Lenders are allegedly engaging in unfair business practices with the goal of profiting at the expense of struggling homeowners.
All 50 state attorneys general have begun to investigate the foreclosure practices of lenders across the country in light of claims that loan servicers may be taking advantage of struggling homeowners to boost their profits. It is believed that lenders’ failure to provide eligible borrowers with loan modifications is among the problems plaguing the mortgage servicing industry. By offering borrowers temporary repayment plans instead of permanent modifications, forcing borrowers to submit the same paperwork repeatedly, returning or refusing to accept payments or otherwise delaying and obstructing borrowers, lenders are allegedly engaging in unfair business practices with the goal of profiting at the expense of struggling homeowners.
It has been reported that foreclosures are more profitable for lenders than loan modifications. When a homeowner falls behind on their mortgage, the lender must front the payment to investors. Upon foreclosure, the lender will typically be the first in line to recover their losses. If the home loan was modified, the lender will lose money that they may not be able to recover. Furthermore, the bank will be able to take foreclosure-related fees accrued during the prolonged modification process, such as property inspection fees, late fees and attorneys’ fees, off the top of the foreclosure proceeds.
Lenders who avoid permanent loan modifications can benefit in a number of other ways, including by avoiding the cost of repurchasing loans from the investor to permanently modify the loan. Additionally, these lenders can avoid increased overhead expenses associated with loan modifications, such as the up-front cost for additional staffing, credit reports, financing costs and property valuation.
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